United States Government Accountability Office GAO Report to Congressional Committees March 2012 KC-46 TANKER AIRCRAFT Acquisition Plans Have Good Features but Contain Schedule Risk GAO-12-366 March 2012 KC-46 TANKER AIRCRAFT Acquisition Plans Have Good Features but Contain Schedule Risk Highlights of GAO-12-366, a report to congressional committees Why GAO Did This Study What GAO Found Aerial refueling is essential to global The KC-46 program has established its acquisition strategy for development and U.S. military operations. The backbone production, including total cost, procurement quantities, and key milestone dates. of the nation’s tanker forces—the KC- The program is using a $4.4 billion fixed-price incentive (firm target) development 135 Stratotanker—is over 50 years old contract that provides contractor incentives to control costs and limits the on average with age-related problems government’s liability for increased costs over a certain amount. While estimated and increasing support costs that could development costs are currently $900 million higher than the February 2011 ground the fleet. Given this, the Air contract award amount, the government’s share of these extra costs is limited to Force has initiated the $51.7 billion about $500 million. The program has identified key performance parameters, but KC-46 program to start replacing the has not yet fully implemented the metrics for tracking their achievement. current fleet. Plans are to produce 18 tankers by 2017 and 179 aircraft There is broad agreement that KC-46 schedule risk is a concern. In GAO’s through 2027. Other follow-on assessment, significant concurrency, or overlap, among development and procurements are anticipated to production activities add risk to the program. The Air Force and contractor replace all KC-135s (see graphic). have assessed overall schedule risk as moderate, citing concerns about The National Defense Authorization software and the ability to complete development flight testing on time. Act for Fiscal Year 2012 requires GAO Further, the DOD’s chief testing official finds the testing schedule not to annually review the KC-46 program executable as currently planned. While designing a new tanker using a through 2017. This report addresses modified commercial platform is not as technically challenging as a more (1) the program’s acquisition strategy, revolutionary weapon system, the program still faces some technical risks, including its contracting approach; (2) including technologies that have not yet been demonstrated during flight. the major schedule and technical risks; and (3) the extent the program’s The KC-46 program’s acquisition strategy provides a good framework for acquisition strategy and documentation meeting GAO’s knowledge-based best practices, and generally adheres to comply with policy, legislation, and defense policy guidance and recent acquisition reform legislation. DOD best practices. To address these waived the requirement for a preliminary design review before the program areas, GAO reviewed key documents began system development and demonstration, but this design review is on the program’s contract and cost planned for March 2012. Although the program’s three critical technologies baseline. GAO discussed the major have not yet achieved the level of maturity indicated in best practices, they schedule and technical risks with have reached a level of maturity consistent with DOD policy. Given that the program office officials and examined KC-46 is one of only a few major programs in recent years to use a fixed- an independent technology readiness price incentive contract and the importance of tanker replacement to assessment. GAO also assessed the national security, rigorous monitoring of the program’s progress will be acquisition plan and required essential. documentation to determine compliance with acquisition legislation, Notional Representation of Air Force Plans to Replace Tanker Fleet policy, and best practices. What GAO Recommends GAO recommends DOD leadership monitor the progress and outcomes of this contract to provide lessons learned for future acquisition programs, and the program fully implement metrics to track achievement of key performance parameters. DOD fully concurred. View GAO-12-366. For more information, contact Michael J. Sullivan at (202) 512-4841, or firstname.lastname@example.org. United States Government Accountability Office Contents Letter 1 Background 2 KC-46 Program Has Established Its Acquisition Strategy 7 Key Events in Program Schedule Are Concurrent and Technical Challenges Exist 12 With Some Exceptions, the Program’s Development Strategy Generally Adheres to Best Practices, Acquisition Reform Legislation, and DOD Policy 18 Conclusions 24 Recommendations for Executive Action 25 Agency Comments 25 Appendix I Scope and Methodology 28 Appendix II KC-135 Fleet Capabilities Compared to KC-46 Planned Capabilities for Aerial Refueling 30 Appendix III DOD and KC-46 Program Office Implementation of Applicable Sections of the 2009 WSARA 31 Appendix IV KC-46 Program Compliance with Key Requirements Documents 33 Appendix V Comment from the Department of Defense 34 Appendix VI GAO Contacts and Acknowledgments 39 Tables Table 1: Comparison of Current KC-135 versus Planned KC-46 Performance Capabilities 7 Table 2: Approved KC-46 Quantities, Cost, and Schedule 8 Page i GAO-12-366 KC-46 Tanker Aircraft Table 3: KC-46 Development Contract Values and Current Estimates 9 Table 4: Description of KC-46 Key Performance Parameters 12 Figures Figure 1: Notional Representation of Plan for Air Force Tanker Fleet Replacement 5 Figure 2: Conversion of Boeing 767-2C into KC-46 Aerial Refueling Tanker 6 Figure 3: Planned KC-46 Program Concurrency between Development and Production 13 Figure 4: KC-46 Planned Program Events Compared to GAO Best Practices 21 Abbreviations CAPE Cost Assessment and Program Evaluation DOT&E Director, Operational Test & Evaluation DOD Department of Defense EMD Engineering and Manufacturing Development FAA Federal Aviation Administration ICE Independent Cost Estimate KPP Key Performance Parameters OSD Office of the Secretary of Defense SCP Service Cost Position This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. Page ii GAO-12-366 KC-46 Tanker Aircraft United States Government Accountability Office Washington, DC 20548 March 26, 2012 Congressional Committees Aerial refueling—the transfer of fuel from an airborne tanker to a receiving aircraft—is critical to global U.S. military operations, allowing its aircraft to fly further, stay airborne longer, and carry more weapons, equipment, and supplies. According to the Air Force, the national security strategy cannot be executed without aerial refueling. Military operations in Iraq and Afghanistan during the last decade depended on tankers to get the military’s fighters, bombers, and airlifters to the Middle East and operate while there. That said, the backbone of the U.S. large tanker fleet, the KC-135 Stratotanker, is over 50 years old on average and costing increasingly more to maintain and support. In 2004, we reported on Department of Defense (DOD) concerns that age-related problems could potentially ground the aerial refueling fleet and cripple support to combat forces. 1 In February 2011, the Air Force awarded a contract that began a $51.7 billion effort to replace its fleet by starting the KC-46 program. 2 The Air Force plans to develop, test, and procure 18 KC-46 tankers by 2017, and then go on to procure a total of 179 aircraft to replace about two-fifths of the KC-135 fleet. The National Defense Authorization Act for Fiscal Year 2012 requires that we review the KC-46 program and report by March 1 each year, ending in 2017. 3 In response, this report examines (1) the program’s acquisition strategy, including its contracting approach; (2) the major schedule and technical risks faced by the program; and (3) the extent to which the program’s acquisition strategy and documentation comply with DOD acquisition policy, legislation, and commercial best practices. To address these areas, we reviewed key documents outlining key aspects of the program’s acquisition strategy. We also discussed the major program schedule and technical risks with program office officials and examined 1 GAO, Military Aircraft: DOD Needs to Determine Its Aerial Refueling Aircraft Requirements, GAO-04-349 (Washington, D.C.: June 4, 2004). 2 The KC-46 designation refers to the acquisition program, while the designation for the actual tanker aircraft being procured is the KC-46A. However, for purposes of this report, we will use the KC-46 designation throughout. 3 Pub. L. No. 112-81, § 244. Page 1 GAO-12-366 KC-46 Tanker Aircraft an independent technology readiness assessment. We also reviewed the program’s acquisition plan and required documentation to determine the extent it complied with relevant acquisition legislation, policy, and best practices. We conducted this performance audit from September 2011 to March 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. See appendix I for more information on our scope and methodology. While several types of aircraft provide aerial refueling services, the Background principal effort is currently carried out by the Air Force fleet of 414 KC-135 aircraft. Originally fielded in the 1950s, KC-135 aircraft are considered the mainstay of the tanker fleet, supporting combat air assets, deployment of airlift aircraft, and nuclear combat refueling missions. With an average age of nearly 51 years and more than 16,000 flight hours on each aircraft, the KC-135s will approach over 80 years of age when the fleet is retired as projected in the 2040 time frame. In 1981, the Air Force began supplementing its fleet of KC-135s with the procurement of 60 KC-10s (of which 59 remain in service today), multi-role aircraft that transport air cargo and provide refueling. Much larger than the KC-135, the KC-10 provides both boom and hose and drogue refueling capabilities 4 on the same flight and can conduct transoceanic missions. The KC-10s now average about 27 years of age with more than 26,000 flight hours on each, and their service life is expected to end around 2045. The Air Force has upgraded and modified both fleets in recent years, providing improved avionics and new engines on the KC-135 along with newer communication systems to comply with international and federal air traffic requirements. 4 Currently, Air Force fixed-wing aircraft refuel with the “flying boom.” The boom is a rigid, telescoping tube that an operator on the tanker aircraft extends and inserts into a receptacle on the aircraft being refueled. Air Force helicopters, and all Navy and Marine Corps aircraft refuel using the “hose and drogue.” The “hose and drogue” system involves a long, flexible refueling hose stabilized by a drogue (a small windsock) at the end of the hose. Page 2 GAO-12-366 KC-46 Tanker Aircraft In 1996, GAO reported that the aging KC-135s would eventually need to be replaced. 5 We recommended that DOD consider looking at dual-use aircraft—which could be used as a tanker or a cargo carrier, depending on their missions. In 2001, the Air Force reported that the KC-135 fleet would incur much greater operations and maintenance (O&M) costs between 2001 and 2040, but that it would be structurally sound to 2040. 6 Air Force officials stated in 2005 that engine strut fatigue caused by long- term heat exposure and corrosion posed the greatest threat to the KC- 135 fleet and O&M costs were increasing. These costs, nearly $2 billion in fiscal year 2010, are expected to grow to $6 billion per year by fiscal year 2018. The 2012 Air Mobility Master Plan also expresses concerns that advanced adversary threats pose greater risk to the current tanker fleet and that the KC-135 fleet lacks defensive capabilities required to operate and succeed against either current or future threats. Tanker Replacement Plans to begin replacing the KC-135 fleet were first developed in 2001 History with Congress authorizing a pilot program to lease 100 Boeing 767 aircraft modified for aerial refueling, subsequently called the KC-767A aircraft. 7 This leasing deal was ultimately canceled, however, after a DOD investigation found that a senior Air Force official improperly approved the leasing deal. After the canceled tanker leasing deal, an Analysis of Alternatives (AOA) 8 was conducted which determined that use of a tanker based on a commercial aircraft would be the most cost-effective way to replace the Air Force’s aging fleet of KC-135s. In January 2007, DOD issued a request for proposal (RFP) 9 to procure 179 such tankers. On February 5 GAO, U.S. Combat Air Power: Aging Refueling Aircraft Are Costly to Maintain and Operate, GAO/NSIAD-96-160 (Washington, D.C.: Aug. 8, 1996). 6 “KC-135 Economic Service Life Study,” Technical Report F34601-96-C-0111, Feb. 9, 2001. 7 Pub. L. No. 107-117, § 8159. 8 The AOA is an important element of the defense acquisition process. An AOA is an analytical comparison of the operational effectiveness, suitability, and life-cycle cost (or total ownership cost, if applicable) of alternatives that satisfy established capability needs. Defense Acquisition Guidebook, 3.3.1. 9 The Federal Acquisition Regulation (FAR) provides for the use of RFPs in negotiated acquisitions to communicate government requirements to prospective contractors and to solicit proposals. FAR § 15.203(a). Page 3 GAO-12-366 KC-46 Tanker Aircraft 29, 2008, the Air Force awarded the first contract of a three-phased approach, called the KC-45, to a partnership between Northrop Grumman and the European Aeronautic Defence and Space Company (EADS) to build four aircraft for testing and then manufacture 175 production aircraft. Boeing, the competing bidder, filed a protest with the Government Accountability Office (GAO) protesting the Air Force’s decision. In June 2008, GAO determined that the Air Force had made significant errors, including not assessing the relative merits of the proposals in accordance with the evaluation rules and criteria set out in the RFP, which could have affected the outcome of the competition. 10 As a result, the Office of the Secretary of Defense (OSD) directed the Air Force in September 2008 to terminate the contract and conduct a new competition. On February 24, 2010, the Air Force released a significantly revised KC-X RFP. One year later, Boeing won the new competition to develop and build 179 new KC-46s at an estimated cost of $51.7 billion. The development portion of the contract to design and build 4 test aircraft, and then bring those aircraft to a final production configuration, is valued at $4.4 billion. The Air Force plans to exercise two contract options for 19 initial production aircraft that are required, in part, for the contractor to meet the requirement to produce and deliver 18 aircraft by 2017. Additional contract options can be exercised to allow for production of the remaining 156 aircraft through year 2027 at a target rate of 15 aircraft per year. Separate competitions are planned for later acquisitions, called the KC-Y and KC-Z phases, to replace the rest of the KC-135 fleet. Figure 1 below depicts a notional schedule of how the Air Force plans to replace its current KC-135s over the next several decades. 10 The Boeing Company, B-311344 et al., June 18, 2008, 2008 CPD ¶ 114. Page 4 GAO-12-366 KC-46 Tanker Aircraft Figure 1: Notional Representation of Plan for Air Force Tanker Fleet Replacement Note: KC-46 build-up represents planned production quantities, not planned deliveries and does not include four development test aircraft. KC-46 Program The KC-46 program is planning to turn a Boeing commercial aircraft (the 767-2C) into a militarized KC-46 tanker that is more capable than the KC- 135. Boeing is currently developing the 767-2C, which is based on a Boeing 767 model airframe modified to include a cargo door, new fuel tanks and an advanced flight deck display borrowed from the new Boeing 787 aircraft. Militarization of this airframe includes the addition of the refueling boom, centerline drogue system with wing refueling pods, a remote air refueling operator station that includes panoramic three- dimensional displays and threat detection and avoidance systems using advanced software to automatically re-route the aircraft away from threats. Program officials consider the integration of military hardware and software on a commercial platform to be the primary technical risk. Figure 2 below shows the intended conversion of the 767-2C into the KC-46 aerial refueling tanker. Page 5 GAO-12-366 KC-46 Tanker Aircraft Figure 2: Conversion of Boeing 767-2C into KC-46 Aerial Refueling Tanker The new tanker is also planned to have several capabilities that existing KC-135s do not have. For example, the KC-46 is expected to be able to refuel in a variety of night-time settings, including covert (not easily visible) mode which the KC-135 cannot do. In addition, it is intended to have countermeasures which protect large aircraft from infrared missile threats. The KC-46 fleet will also have more aircraft with the capability to refuel two aircraft at the same time, with the entire fleet able to conduct this mission, and the ability to carry more cargo, passengers, and medical patients. Table 1 compares the current capabilities of the KC-135 with the planned capabilities of the new KC-46 tanker. (More detail on the planned capabilities is included in appendix II.) Page 6 GAO-12-366 KC-46 Tanker Aircraft Table 1: Comparison of Current KC-135 versus Planned KC-46 Performance Capabilities Key capability KC-135 KC-46 Primary function Aerial refueling and airlift with Aerial refueling and airlift with 200,000 lbs. total fuel for 207,672 lbs. total fuel for refueling refueling Boom refueling Hydraulic system with 1,176 Computer assisted with 1,200 gallons per minute refueling gallons per minute refueling rate rate Hose and drogue Permanent system does not Permanent centerline hose and refueling exist—must be temporarily drogue system added Refueling of two aircraft Limited to 20 tankers with the All tankers have the capability at the same time capability to attach wing pods to attach wing pods and and conduct multipoint conduct multipoint refueling, refueling of two aircraft but only 46 sets of wing pods will be procured Cargo/passenger/ 6 cargo pallets, 53 18 cargo pallets, 114 medical patient passengers, 44 medical passengers, 58 medical patients patients Defensive systems Does not possess sufficient Protection from nuclear, systems infrared (heat seeking missiles), and biochemical threats Night-time refueling Restricted in tactical missions Able to refuel in tactical missions Source: GAO presentation of Air Force data. The KC-46 program has established its acquisition strategy for aircraft KC-46 Program Has development and production, which includes a total cost estimate of Established Its $51.7 billion, aircraft quantities to be procured, key milestone dates, and test and manufacturing schedules. The KC-46 program is using a fixed- Acquisition Strategy price contract for development, designed to provide a profit incentive for the contractor to control costs, while limiting government liability for increased costs over a certain amount. The program has also identified nine key performance parameters (KPP) critical to enabling the KC-46 to meet mission requirements, but has not yet fully implemented metrics that will be used to track the achievement of these KPPs. KC-46 Approval of In February 2011, senior defense leaders approved the KC-46 program’s Baseline Cost, Schedule, entry into the acquisition process at the Engineering and Manufacturing and Aircraft Quantities Development (EMD) phase (called Milestone B). Table 2 summarizes planned quantities, costs, and milestone dates approved at that time. Page 7 GAO-12-366 KC-46 Tanker Aircraft Table 2: Approved KC-46 Quantities, Cost, and Schedule Expected quantities Development quantities 4 Procurement quantities 175 Total quantities 179 Cost estimates (then-year dollars in millions) Development $7,149.6 Procurement $40,236.0 Military Construction $4,314.6 Total program acquisition $51,700.2 Unit cost estimates (then-year dollars in millions) Average program acquisition $288.8 Average procurement $229.9 Key milestones Program contract award (Milestone B) February 2011 Low rate initial production (Milestone C) August 2015 Initial operational test and evaluation start May 2016 Full rate production decision June 2017 Required assets available (18 aircraft operationally ready) August 2017 Source: GAO presentation of Air Force data. Defense officials established a total acquisition program baseline cost of $51.7 billion. The development cost estimate of $7.1 billion includes $5.3 billion for the development contract and $1.8 billion for other costs, including air crew and maintenance training systems, operational testing, and program office support. The procurement cost estimate of $40.2 billion is based on projected prices for procuring 175 aircraft in annual quantities of up to 15 aircraft through fiscal year 2027. At this price, aircraft would cost almost $230 million on average. Military construction costs to build hangars, maintenance and supply shops, and other facilities to house and support the KC-46 fleet are estimated at $4.3 billion. Following a successful initial production decision, the Air Force plans to exercise the first two production contract options. After the options are exercised, Boeing will be required to provide the Air Force with a total of 18 operationally ready aircraft 78 months after development contract Page 8 GAO-12-366 KC-46 Tanker Aircraft award, which would be by August 2017. 11 Further contract options are planned to continue through 2027, until a total of 179 aircraft are bought. Development Contract In February 2011, the Air Force awarded Boeing a fixed-price contract to Includes Features to develop, test, and manufacture four KC-46 aircraft. The specific contract Control Cost, Schedule, arrangement used by the KC-46 program is a fixed-price incentive (firm target) (FPIF) contract. Table 3 provides development contract details and Performance Risk and the current contract and government estimates to complete development. Table 3: KC-46 Development Contract Values and Current Estimates Dollars in millions FPIF contract line items Total contracta Contract amounts Target price $4,327.3 $4,393.9 Ceiling price $4,831.0 $4,897.6 Current estimates Contractor $5,096.9 $5,163.5 by: Government $5,284.4 $5,351.0 Source: KC-46 Selected Acquisition Report, the Federal Procurement Data System – Next Generation, and GAO calculations. a Total contract amounts are different from FPIF amounts because they include two firm fixed price contract line items, one for technical data license rights and one for testing. The contract is designed to provide a profit incentive for the contractor to control or even reduce costs. It specifies target cost, target price, and ceiling price amounts, with the latter being the maximum amount that may be paid to the contractor. The target price is $4.4 billion and the ceiling price $4.9 billion. The contract specifies a 60/40 incentive ratio for sharing savings in the event of underruns, or sharing cost in the event of overruns. The government’s share is 60 percent while Boeing’s is 40 percent. Cost sharing ends when the contract price reaches the $4.9 billion ceiling. Thereafter, provided the Air Force is not responsible for any of the additional costs associated with the overruns, the contractor would be responsible for all additional costs associated with the overruns and would be obligated to perform the contract. If the Air Force is responsible 11 According to program officials, the government will hold Boeing accountable to the terms and conditions of the contract and seek consideration from Boeing if they do not perform to the contract requirements. Page 9 GAO-12-366 KC-46 Tanker Aircraft for any of the cost overruns, they may have to renegotiate the terms and conditions of the contract with Boeing. The KC-46 program’s current government estimate to complete development is $5.3 billion, which is about $900 million more than the contract target price and about $400 million more than the ceiling price. The Air Force believes this additional $400 million may be necessary to cover schedule risk for the remainder of development, and if it is, Boeing must pay these costs. According to program officials, a change in system requirements, although unlikely, would be a circumstance that could increase the Air Force’s exposure to additional costs. As stated in a memorandum from the OSD Office of Cost Assessment and Program Evaluation, 12 the biggest risk to the KC-46 program is the Department’s ability to minimize changes to the contract. The memorandum maintains that on the whole, DOD has demonstrated limited ability to maintain stable requirements and limit changes to program technical baselines on previous complex weapon system programs, and that minimizing such change is essential to the success of the KC-46. In view of these concerns, program officials state it is very unlikely any requirements will be changed, and to help ensure this, they have instituted a process to control changes. Specifically, any engineering or contract changes affecting system requirements or having the potential to impact program cost, schedule, and performance baselines must be approved by the Air Force Service Acquisition Executive in consultation with the Secretary and the Chief of Staff of the Air Force. Moreover, the contract contains options for the 175 production aircraft, establishing firm, fixed pricing for two initial production lots and not-to-exceed pricing for subsequent full-rate production lots. Program officials maintain that this pricing will likely stay intact as long as the contract is not opened to negotiate modifications. The KC-46 contract is one of only a few major weapon system programs in recent years to employ a fixed-price development contract. In the past, DOD has typically used cost-reimbursement contracts in which the government pays all allowable incurred costs to the extent prescribed by the contract. Legislation and defense policy now directs the Milestone Decision Authority for a major defense acquisition program to select the contract type for a development program at the time of a decision on 12 The Office of Cost Assessment and Program Evaluation provide independent cost estimates for major DOD weapon system programs. Page 10 GAO-12-366 KC-46 Tanker Aircraft Milestone B that is consistent with the level of program risk for the program. The Milestone Decision Authority may select either a fixed-price type contract (including a fixed-price incentive contract); or a cost type contract. The use of fixed-price contracts, when warranted, limits the government’s exposure to weapon system cost increases. Defense officials believe that a fixed-price development contract is appropriate for this program because KC-46 development is considered to be a relatively low risk effort to integrate mature military technologies onto a well-defined commercial derivative aircraft. In addition to the type of contract used, there are also provisions in the KC-46 development contract that further limit the government’s liability and are intended to help manage performance risk. For example, Boeing has to correct any deficiencies in the KC-46 discovered during the development program. The correction of deficiencies shall be accomplished on the four development test aircraft and all production aircraft, as appropriate, to bring them to the final configuration at no additional cost to the government. In addition, there is a special contract provision that requires each aircraft to demonstrate a certain fuel usage rate before the government accepts the aircraft. If any aircraft burn fuel above this rate, Boeing is required to propose a corrective action at no cost to the government. Boeing is not allowed to propose a relaxation of contract requirements to resolve any fuel usage issues, but if Boeing cannot meet the required usage rates, there are contract provisions allowing for a decrease in the amount paid to Boeing. Key Performance Goals The Air Force has identified nine specific KPPs critical to enabling the Have Been Identified but KC-46 to meet its primary mission of providing worldwide, day and night, Metrics for Measuring adverse weather aerial refueling. Several of these parameters have been established to address performance characteristics that are limited or Achievement Are Not Yet nonexistent in the current tanker fleet. For example, in 2005 only 8 KC- Fully Implemented 135 aircraft (1.5 percent) had the capability to receive fuel from another aerial refueling tanker while airborne. This limited capability can prohibit the extension of aircraft forces and can result in inefficient use of assets. By establishing a KPP to allow for the KC-46 fleet to receive fuel from other tankers, the Air Force hopes to address this shortcoming. Table 4 describes the planned KC-46 KPPs. Page 11 GAO-12-366 KC-46 Tanker Aircraft Table 4: Description of KC-46 Key Performance Parameters Key performance parameter Description Tanker air refueling capability Aircraft shall be capable of accomplishing air refueling of all DOD current and programmed (budgeted) receiver aircraft. The aircraft shall be capable of conducting both boom and drogue air refueling on the same mission. Fuel offload versus radius Aircraft shall be capable of carrying certain amounts of fuel (to use in air refueling) certain distances. Operate in civil and military Aircraft shall be capable of worldwide flight operations in airspace all civil and military airspace. Airlift capability Aircraft shall be capable of transporting certain amounts of both equipment and personnel. Receiver air refueling Aircraft shall be capable of receiving air refueling from capability any compatible tanker aircraft. Force protection Aircraft shall be able to operate in chemical and biological environments. Net-ready Aircraft must be able to have effective information exchanges with many other DOD systems to fully support execution of all necessary missions and activities. Survivability Aircraft shall be capable of operating in hostile threat environments. Simultaneous multi-point Aircraft shall be capable of conducting simultaneous refueling drogue refueling on multiple aircraft. Source: GAO presentation of Air Force data. Near the end of KC-46 development, a series of independent tests and evaluations are planned to validate whether the aircraft meets these KPPs. However, the Air Force still has to fully implement the specific metrics needed to measure progress against the KPPs. In future reports, we will include an evaluation of metrics established for each of these KPPs as well as whether the program is on track to meet them. Schedule risk on the KC-46 program is a concern and technical Key Events in challenges will need to be overcome. The program has an accelerated Program Schedule schedule with significant overlap, or concurrency, among the development, testing, and production of initial aircraft. Also, while Are Concurrent and designing a new tanker that uses a modified commercial platform may not Technical Challenges be as technically challenging as an all new weapon system, the program still faces some technical risks, including three critical technologies that Exist have not yet been tested in a realistic environment. Page 12 GAO-12-366 KC-46 Tanker Aircraft Significant Concurrency The significant amount of concurrency in the KC-46 schedule among Poses Risks to KC-46 planned development, testing, and production activities are highlighted by Development and the shaded area in figure 3. Production Schedule Figure 3: Planned KC-46 Program Concurrency between Development and Production The decision to begin low-rate initial production is scheduled for August 2015, before significant development and testing activities are completed. While about 6 months of 767-2C flight testing is planned to be conducted prior to KC-46 flight testing to help prove the aircraft’s design and flying Page 13 GAO-12-366 KC-46 Tanker Aircraft qualities, only about 60 percent of the dedicated KC-46 development flight testing is planned to be completed by the start of low-rate initial production, when the Air Force estimates $1.38 billion will be needed for seven aircraft. Funding commitments will be required even sooner; DOD will present the budget request for KC-46 initial production to Congress in February 2014. The intent of development flight testing is to demonstrate the maturity of the design and to discover and fix design and performance problems while the aircraft is being developed. Beginning production before testing has successfully demonstrated that the design is mature and that aircraft will work as intended increases the likelihood of discovering deficiencies during production, when it is most expensive to correct them. Similarly, systems already built and fielded may require substantial modifications, resulting in additional program costs. The Air Force and Boeing are both concerned about the risks in the KC- 46 development and test schedule. In August 2011, a joint Boeing and Air Force team completed a detailed review to identify risk associated with the program’s technology, cost, and schedule. As a result of that review, the Air Force determined that the schedule, culminating with the delivery of 18 aircraft by August 2017, contained moderate risk. 13 Other major areas examined during this review were assessed as low risk. According to the KC-46 program office, schedule risk stems from four primary factors: • Flight testing. Completing the flight test program on time will require efficient, synchronized use of DOD, Air Force, and Federal Aviation Administration (FAA) test facilities and resources. The KC-46 program office is concerned that Boeing will not be able to achieve planned flight test flying hour rates for military certifications and military testing, currently set at 50 hours per aircraft per month, given the amount of coordination and synchronization of test resources required. Boeing is also continuing to evaluate plans for the flight test program due to concerns it may contribute to program schedule risk. For these and other reasons, DOD’s Office of the Director, Operational Test and 13 The delivery of these aircraft must be accompanied by all the required training equipment, support equipment, and the support necessary for their sustainment. Page 14 GAO-12-366 KC-46 Tanker Aircraft Evaluation, has determined that the development test program is not executable as planned. • In-line provisioning. Boeing typically uses one facility as its commercial aircraft production line and another to install military modifications on commercial aircraft. However, on the KC-46 program, Boeing will do extra preparatory work—provisioning—at its commercial facility to accommodate the military modifications planned at its other facility. This represents an additional requirement to prepare the aircraft for military modifications while still on the commercial production line. According to the program office, this increases the level of risk for accomplishing the work on time. • Federal Aviation Administration certification. According to the program office, two FAA certifications, one for the commercial 767-2C aircraft and a supplemental one for the military modifications planned for the commercial aircraft, are required for the KC-46 before it is deemed airworthy. Boeing intends to accomplish a portion of both of these certifications concurrently, rather than one at a time, which is more typical. According to the program office, if problems arise during this concurrency, not much time will be left in the schedule for Boeing to recover. • Software. The program office told us that modifications to commercial software to separate classified from unclassified information and enable other military capabilities will increase risk associated with software development. However, they also stated that they are focusing on software early in the program to ensure Boeing puts the proper emphasis on this area and keeps the program schedule on track. Boeing has also identified risks in the program’s software development effort that could delay the program’s schedule or drive increased cost if realized. Software development growth can occur because of bad estimates, poor requirements, and poor execution of the software development plan. If the amount of software being developed grows, more staff and more time will be needed. There can also be delays in the integration of hardware and software if software deliveries from suppliers are late. Late delivery can result in hardware and software not being integrated in time to support flight testing, which in turn can mean flight test schedule delays. A further complication to the KC-46 schedule was Boeing’s January 2012 announcement that it was closing its Wichita, Kansas finishing facility at the end of 2013. When the contract was awarded, Boeing had planned to militarize the KC-46 at the Wichita facility. Now, that work will be moving to the Puget Sound facility in Seattle, Washington to be co-located with Page 15 GAO-12-366 KC-46 Tanker Aircraft the 767-2C development effort. KC-46 program officials stated that they are working closely with Boeing to understand the impact of this decision on the KC-46 program but will hold Boeing to its contractual delivery date of August 2017. If the provisions in the current contract remain intact, the government’s cost liability will be safeguarded should any of the foregoing risks materialize into problems. However, these provisions cannot prevent delays in delivering aircraft should problems be discovered late in development or while production is underway. KC-46 Will Have Some Risk While a tanker largely based on a commercial platform and subsystems Stemming from New may not be as technically challenging as developing a wholly new Technical Content weapon system like the Joint Strike Fighter, DOD regulations still require requisite critical technologies to be sufficiently mature prior to starting system development in order to minimize technology risk down the road. As required by DOD policy, a technology readiness assessment was conducted by an independent team of subject matter experts. Overall, the team reviewed and assessed 36 technologies and determined that three are new or novel and are needed for the KC-46 tanker to meet performance and mission capabilities. These three technologies—3- Dimensional Display, Airborne ESTAR, and Threat Correlation Software—have been demonstrated in a relevant environment 14 in accordance with DOD and statutory requirements. 15 • Three-Dimensional Display. The display screens at boom operator stations inside the KC-46 aircraft provide the visual cues needed for the operator to monitor the aircraft being refueled before and after contact with the refueling boom or drogue. The images of the aircraft on the screens are captured by a pair of cameras outside that aircraft that are meant to replicate the binocular aspect of human vision by supplying an image from two separate points of view, replicating how 14 GAO has previously defined technology readiness level 6 to mean that a model or prototype close to final form, fit and function has been tested in a high fidelity laboratory environment or in a simulated operational environment. GAO, Defense Acquisitions: Assessments of Selected Weapon Programs, Appendix III, GAO-09-326SP (Washington, D.C.: March 2009). 15 10 U.S.C. Section 2366b(a)(3)(D); Department of Defense Instruction 5000.02, Operation of the Defense Acquisition System, enc. 2, para. 5.d. (4) (Dec. 8, 2008). Page 16 GAO-12-366 KC-46 Tanker Aircraft humans see two points of view, one for each eye. The resulting image separation provides the boom operator with greater fidelity and a more realistic impression of depth, or a third dimension. Similar technology has been used on two foreign-operated refueling aircraft and a representative model in tests with other Boeing tankers. • Airborne ESTAR. This software module is planned to have an algorithm that allows for automatically re-routing and constructing new flight paths for the aircraft that are safe, flyable, and avoid potential threats. The algorithm is new and novel technology, critical to meeting operational requirements. Airborne ESTAR has been tested in a simulation that provided data on its performance, interfaces, and functionality. • Threat Correlation Software. Somewhat similar to Airborne ESTAR, this new software module serves to correlate tracks from multiple potential threats and automatically help re-route the tanker’s flight path to avoid them. These technologies have not yet been demonstrated in a realistic environment, a higher level of maturity that is a best practice. 16 We have previously reported that programs that began development with technologies demonstrated to this level experienced less cost growth than programs with less mature technologies. 17 To the extent that alternatives or workarounds are available for any of the KC-46’s technologies, these risks would be mitigated. In addition to the critical technologies identified, the KC-46 program office identified other integration and technical areas where management will need to focus efforts to mitigate risk. The program office identified the following three areas as being among the more significant: • Radar Warning Receiver integration. A radar warning receiver warns a pilot that a threat aircraft’s radar is tracking the KC-46, but 16 GAO has previously defined technology readiness level 7 to mean that an actual system prototype has been integrated with key supporting subsystems to demonstrate full functionality and flight-tested in a realistic operational environment. GAO, Defense Acquisitions: Assessments of Selected Weapon Programs, Appendix III, GAO-09-326SP (Washington, D.C.: March 2009). Our extensive body of work in commercial best practices suggests that this higher standard be attained for each critical technology before a new acquisition enters system development. 17 GAO, Defense Acquisitions: Assessments of Selected Weapon Programs, GAO-11-233SP (Washington, D.C.: Mar. 29, 2011). Page 17 GAO-12-366 KC-46 Tanker Aircraft integrating such a receiver on a large commercial airframe can be challenging. Integration requires a unique antenna design and certain provisions for installation to maximize performance. Any late changes to the location of the receiver’s antennae or software could drive cost and schedule impacts to the program. • Wing Aerial Refueling Pod instability. Based on lessons learned from another Boeing refueling aircraft, a new aerial refueling pod design was introduced for the KC-46 to reduce buffeting, or instability, of the aircraft’s wing. The new design also made changes to the way the refueling hose exits the pod, so now there is concern about the hose not being stable. If the new wing pod design has technical shortcomings and introduces hose stability issues, this would not meet program requirements. • Aircraft Weight. The current aircraft weight forecast is near the aircraft’s weight limit and, historically, weight continues to increase during a weapon system program development phase. Not achieving the target weight will make the aircraft unable to carry the required amount of fuel for its aerial refueling mission. The KC-46 program’s acquisition strategy and business case generally With Some meet GAO’s knowledge-based acquisition approach and best acquisition Exceptions, the practices, including those in legislation to improve the weapon system acquisition process. Also, the contents of the program’s requirements Program’s documentation generally comply with DOD guidance. However, the Development Strategy program did not conform to best practices in a few instances. The Generally Adheres to program did not conduct a technology development phase and instead proceeded directly to the system development phase, and our prior work Best Practices, has shown that programs proceeding directly to a development phase Acquisition Reform typically have more problems. The program also received a waiver from having to conduct a preliminary design review, considered important to Legislation, and DOD initially solidifying the aircraft’s design, before beginning development. Policy Instead, the design review is planned for March 2012, about a year after the start of development. Page 18 GAO-12-366 KC-46 Tanker Aircraft Program Is Generally For the most part, the KC-46 program’s acquisition framework and plans Implementing Acquisition compare favorably with the standards and requirements in GAO’s best Best Practices practices work on weapon system acquisition development. The program’s Acquisition Strategy 18 establishes the decision points and acquisition phases planned for the program. It also covers development, testing, production, and life-cycle support and establishes the requirements for each phase, and also identifies critical management events and risks including integration of military hardware and software on the KC-46 airframe. The program’s Integrated Baseline Review (IBR) 19 resulted in a mutual understanding between the KC-46 program office and Boeing ensuring all system capabilities are understood and program requirements are flowed down to the contractor and suppliers. A comprehensive risk assessment also identified all program risks, and assigned moderate risk to the program’s development schedule. The program is also starting to establish a knowledge-based acquisition approach, in which knowledge of various components of the process is acquired at key decision points before proceeding. Our best practices model helps decision makers to be reasonably certain about their products at critical junctures during development and to make informed investment decisions. This knowledge-based process can be broken down into three cumulative knowledge points. • Knowledge point 1: A match must be made between the customer’s needs and the developer’s available resources—technology, engineering knowledge, time, and funding—before a program starts. • Knowledge point 2: The product’s design must be stable and must meet performance requirements before initial manufacturing begins. • Knowledge point 3: The product must be able to be produced within cost, schedule, and quality targets and demonstrated to be reliable before production begins. 18 The Acquisition Strategy is a comprehensive, integrated plan that identifies the acquisition approach, and describes the business, technical, and support strategies that management will follow to manage program risks and meet program objectives. 19 Integrated Baseline Review is a formal review conducted by the government program manager and technical staff, jointly with their contractor counterparts, following contract award to verify the technical content of the performance measurement baseline and the accuracy of the related resource (budgets) and schedules. Page 19 GAO-12-366 KC-46 Tanker Aircraft Figure 4 depicts how the KC-46 program office is incorporating a best practices approach into its acquisition framework including the planned dates key events are scheduled and how the plan compares to GAO’s knowledge-based process for development. As the program progresses, we will continue to assess its performance against acquisition best practices, using figure 4 as a template. Page 20 GAO-12-366 KC-46 Tanker Aircraft Figure 4: KC-46 Planned Program Events Compared to GAO Best Practices Page 21 GAO-12-366 KC-46 Tanker Aircraft Program Did Not Have a Although the program is implementing many acquisition best practices, Technology Development the program office did not conduct a technology development phase and Phase and Waived instead proceeded directly to the engineering and manufacturing development phase. As discussed earlier, the program’s three critical Preliminary Design Review technologies were assessed as approaching maturity and meeting internal defense policy, but below the fully mature level in best practices. Our prior work consistently shows that programs going directly into development before fully maturing all critical technologies typically incur additional costs and take longer to complete. Additionally, DOD granted a waiver to the program from having to conduct a preliminary design review—a major step initially solidifying the aircraft’s design—before starting system development. Instead, the program office has plans to conduct this review over a year after the start of development in March 2012 due to their assessment that integrating KC-46 unique military requirements onto a commercial aircraft is low to moderate risk. We have previously reported that holding a preliminary design review prior to development start can help ensure requirements are well-defined and feasible. 20 Nonetheless, the program did complete its system functional review in November 2011 and made no significant changes to program requirements. The program plans to demonstrate the system’s design is stable and have 90 percent of KC-46 design drawings released by its projected July 2013 critical design review. KC-46 Program is The Weapon Systems Acquisition Reform Act of 2009 (Reform Act) 21 Incorporating Recent requires DOD and the military services to place more emphasis on Acquisition Reform activities that should occur early in weapon systems development, including those related to systems engineering and developmental Legislation in testing, to establish a solid program foundation when development Development begins. To comply with this legislation, the KC-46 program office is tracking key program events to the relevant section of the Reform Act. For example, the program office held an independent Technology Readiness Assessment (TRA) which reviewed 36 technologies, identified 3 as critical technologies, and assessed the maturity of all the 20 GAO, Defense Acquisitions: Application of Lessons Learned and Best Practices in the Presidential Helicopter Program, GAO-11-380R (Washington, D.C.: Mar. 25, 2011). 21 Pub. L. No. 111-23. Page 22 GAO-12-366 KC-46 Tanker Aircraft technologies. 22 In addition, the KC-46 program is using a time-defined acquisition strategy based on cost, schedule, and performance trades with a 78-month development cycle and is using an incremental strategy to replace the tanker fleet of KC-135s and KC-10s with the KC-46, and potentially the KC-Y and KC-Z programs. The Reform Act requires DOD to periodically review and assess the technology maturity and the risk of integrating critical technologies of weapon system programs, and requires officials responsible for acquisition, budget, and cost estimating functions to develop estimates and raise cost and schedule matters before performance objectives are established. Appendix III provides a comparison of the Reform Act requirements and program compliance. Key Program The KC-46 key program documentation completed prior to development Documentation Complies start compares favorably with requirements in DOD policy for defining with DOD Policy program capabilities and system requirements as outlined in the Joint Capabilities Integration and Development System (JCIDS) 23 manual. Appendix IV provides a detailed assessment of this compliance, but some examples include: • The Initial Capabilities Document (ICD) 24 identifies capability gaps with the KC-135 fleet in the areas of night-time refueling systems, defensive systems, and communication capabilities. It defines what capabilities will be required in a new tanker aircraft. • The KC-46 Capability Development Document (CDD) 25 describes how capability gaps identified in the ICD will be addressed by developing 22 A TRA is a formal, systematic, metrics-based process and accompanying report that assesses the maturity of technologies called Critical Technology Elements (CTEs) to be used in systems. CTEs can be hardware or software. DOD Technology Readiness Assessment Deskbook, section 1.1. 23 JCIDS plays a key role in identifying the capabilities required by the warfighters to support the National Defense Strategy, the National Military Strategy, and the National Strategy for Homeland Defense. Successful delivery of those capabilities relies on the JCIDS process working in concert with other joint and DOD decision processes. 24 The ICD defines a capability gap or other deficiency in terms of the functional area, the relevant range of military operations, and the timeframe. It also describes the evaluation of Doctrine, Organization, Training, Materiel, Leadership and education, Personnel, and Facilities (DOTMLPF) approaches. 25 The CDD is a document that captures the information necessary to develop a proposed program(s), normally using an evolutionary acquisition strategy. It outlines an affordable increment of militarily useful, logistically supportable, and technically mature capability. Page 23 GAO-12-366 KC-46 Tanker Aircraft KPPs, system characteristics that are considered to be critical to delivering a military capability, and Key System Attributes, lower priority characteristics which are nevertheless essential for effective military capability. The KC-46 CDD defines how each KPP will be addressed in areas including aerial refueling and threats, and how classified information is to be collected and stored. • The KC-46 System Requirements Document (SRD) 26 discusses the scope of program requirements and presents the technical performance required for the replacement tanker. The SRD also defines how some minimum performance requirements are mandatory, and how other requirements identified as non-mandatory are part of the Air Force’s trade space. 27 System requirements discussed in the KC-46 SRD included aerial refueling, airlift, information management, and survivability. The KC-46 acquisition is a high-priority/high-profile program essential to Conclusions ensuring continued delivery of aerial refueling capabilities to future U.S. military operations. Its fixed-price incentive (firm target) development contract is designed to limit the government’s liability for increased costs. Because senior defense officials are encouraging acquisition programs across the department to adopt similar arrangements, when appropriate, it will be both illustrative for the policy and important for future programs to monitor the KC-46’s progress and its degree of success. Some would argue that a degree of program success has already been demonstrated because the government’s cost liability, assuming no system requirements changes, has been capped and the contractor is still required to provide full performance of the contract. However, even with these safeguards, it is important to note that 1 year into development, Air Force and contractor development cost estimates exceed the development contract amount and significant schedule risks have been identified. Although the KC-46 program is still in its early stages, similar cost and schedule pressures have dogged many past and present 26 A SRD establishes the basis for an acquisition program functional baseline. It documents acquisition requirements translated from a warfighter Capability Based Requirements document into an acquisition format used as a baseline for a system or subsystem specification typically prepared by a contractor. 27 Trade space can be defined as the set of program and system parameters, attributes, and characteristics required to satisfy performance standards. Decision makers define and refine the developing system by making tradeoffs with regard to cost, schedule, risk, and performance; all of which fall within the system’s trade space. Page 24 GAO-12-366 KC-46 Tanker Aircraft defense acquisition programs. With 5 years of development remaining on an aggressive schedule with substantial concurrency among development, test, and production activities, prudence and strong management attention is warranted. Should costs continue to increase, or schedule or performance measurement lag, there could be increased pressure to reopen or renegotiate aspects of the contract. This would probably not be advantageous to the Air Force. As one of only a few major acquisition programs to award a fixed-price Recommendations for incentive (firm target) development contract in recent years, evaluating Executive Action performance and identifying lessons learned will be very illustrative and important to inform decision-makers and help guide and improve future defense acquisition programs. Therefore, we recommend that the Under Secretary of Defense for Acquisition, Technology and Logistics closely monitor the cost, schedule, and performance outcomes of the KC-46 program to identify positive or negative lessons learned. To help ensure that progress toward achievement of the program’s key performance parameters can be appropriately measured as development progresses toward production, we recommend the KC-46 program manager, as soon as possible, fully implement sound metrics for each parameter. DOD provided us with written comments on a draft of this report which Agency Comments are reprinted in appendix V. DOD concurred with our two recommendations. In written comments, DOD provided additional information on its plans to manage schedule risk and mature technologies. We also incorporated technical comments as appropriate. We are sending copies of this report to appropriate congressional committees; the Secretary of Defense; the Secretary of the Air Force; and the Director of the Office of Management and Budget. The report also is available at no charge on the GAO Web site at http://www.gao.gov. Page 25 GAO-12-366 KC-46 Tanker Aircraft If you or your staff has any questions concerning this report, please contact me at (202) 512-4841 or email@example.com. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff contributing to this report are listed in appendix VI. Michael J. Sullivan Director Acquisition and Sourcing Management Page 26 GAO-12-366 KC-46 Tanker Aircraft List of Committees The Honorable Carl Levin Chairman The Honorable John McCain Ranking Member Committee on Armed Services United States Senate The Honorable Daniel K. Inouye Chairman The Honorable Thad Cochran Ranking Member Subcommittee on Defense Committee on Appropriations United States Senate The Honorable Howard P. McKeon Chairman The Honorable Adam Smith Ranking Member Committee on Armed Services House of Representatives The Honorable C.W. Bill Young Chairman The Honorable Norman D. Dicks Ranking Member Subcommittee on Defense Committee on Appropriations House of Representatives Page 27 GAO-12-366 KC-46 Tanker Aircraft Appendix I: Scope and Methodology Appendix I: Scope and Methodology We interviewed officials from the KC-46 program, Air Force, and Office of the Secretary of Defense (OSD) to obtain their views on progress, ongoing concerns and actions taken to address them, and future plans to complete KC-46 development. We also reviewed key program documentation for compliance with current Department of Defense (DOD) policy, acquisition reform legislation, and GAO best practices for weapon system development. To determine the program’s acquisition strategy, including its contracting approach, we reviewed briefings by program and contractor officials, budget documents, the Acquisition Program Baseline (APB), the Selected Acquisition Report (SAR), monthly activity reports, performance indicators, risk assessments and other data. We identified changes in cost and schedule, and obtained officials’ reasons for these changes, and reviewed the KC-46 acquisition strategy in order to identify the program’s Key Performance Parameters and what measures the program office has taken to develop metrics and track contractor performance in these areas. We also examined the acquisition strategy for aircraft development and production, but we could not assess the contractor’s manufacturing processes because the program is only one year into development and it is too early for this assessment. To assess the development contract structure, we reviewed and analyzed the factors used to determine the contract geometry: target cost, target profit, ceiling amount, and profit adjustment formula for the current contract and also compared this against current DOD policy for contract geometry, the Federal Acquisition Regulation, and the Fiscal Year 2007 National Defense Authorization Act. To determine program costs, we reviewed the OSD Cost Assessment and Program Evaluation Independent Cost Estimate and the Air Force’s Service Cost Position, the estimate which is used by the KC-46 program to plan its expected costs. We reviewed each estimate’s underlying assumptions including how the estimate was developed and the confidence level used. We also requested information from the program office on whether the SCP cost estimate followed guidelines in GAO’s 2009 Cost Estimating Guide. In order to evaluate the major schedule and technical risks faced by the program, we reviewed the KC-46 Integrated Master Schedule and compared it to the program’s APB and SAR in order to identify potential concurrency in the program’s design reviews, flight testing, and low rate production. We also asked program officials how they are monitoring planned schedule events. To identify potential program risks, we reviewed the program’s Technology Readiness Assessment which identifies critical technology elements and the plan for maturation of these Page 28 GAO-12-366 KC-46 Tanker Aircraft Appendix I: Scope and Methodology technologies. During interviews with program officials we discussed what actions are currently being taken in the areas of earned value management and contractor performance in order to identify problems early in the engineering and manufacturing development phase and ways they planned to mitigate these risks. To assess the extent the program is complying with acquisition policy, legislation, and best practices, we also compared key program documentation and execution with current DOD policy, GAO best practices, and recent acquisition reform legislation to determine areas of compliance and areas for further review as the program continues forward. We compared the KC-46 Initial Capabilities Document, the Capability Development Document, and the System Requirements Document against DOD policy and guidance. We also reviewed program office documentation pertaining to implementing relevant portions of the Weapon Systems Acquisition Reform Act of 2009 and compared program actions back to the legislation to determine whether requirements in the Reform Act are being incorporated into program decisions. We also examined and compared program office schedule documentation, such as the Integrated Baseline Review against GAO’s best practices acquisition framework to identify areas in which the program office is utilizing a knowledge-based approach in KC-46 development. In performing our work, we obtained information or interviewed officials from Air Mobility Command and the KC-46 program office, Wright- Patterson Air Force Base, OH; Defense Contract Management Agency, Seattle, WA; and Federal Aviation Administration, Wichita, KS. We also met with and obtained information from the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, in Washington, D.C. We conducted this performance audit from September 2011 to March 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Page 29 GAO-12-366 KC-46 Tanker Aircraft Appendix II: KC-135 Fleet Capabilities Appendix II: KC-135 Fleet Capabilities Compared to KC-46 Planned Capabilities for Aerial Refueling Compared to KC-46 Planned Capabilities for Aerial Refueling Page 30 GAO-12-366 KC-46 Tanker Aircraft Appendix III: DOD and KC-46 Program Office Appendix III: DOD and KC-46 Program Office Implementation of Applicable Sections of the 2009 WSARA Implementation of Applicable Sections of the 2009 WSARA DOD and KC-46 Program Office WSARA Section Requirement Implementation Title I: Acquisition Organization Section 104: Assessment of Requires Director, Defense Research & Engineering • An independent Technology Technological Maturity of (DDR&E) to periodically review and assess the technology Readiness Assessment (TRA), Critical Technologies of Major maturity and integration risk of critical technologies of approved by DDR&E Defense Acquisition Programs Major Defense Acquisition Programs (MDAP). Requires • The assessment reviewed 36 by the Director of Defense DDR&E to develop knowledge-based standards to technologies, identified 3 critical Research and Engineering measure technology maturity and integration risk. technologies elements, and assessed them as mostly mature Title II: Acquisition Policy Section 201: Consideration of The Secretary of Defense shall ensure consideration of • KC-46 System Requirements Trade-Offs among Cost, trade-offs among cost, schedule, and performance Document reduced requirements to Schedule & Performance objectives as part of the process for developing 372 mandatory and 93 non- Objectives in DOD Acquisition requirements for DOD acquisition programs. DOD officials mandatory that represented Programs responsible for acquisition, budget, and cost estimating capability trade space functions shall provide appropriate opportunity to develop • Time-defined acquisition strategy estimates and raise cost and schedule matters before based on cost, schedule, performance objectives are established. The process for performance trades (78 month developing requirements is structured to enable development cycle) incremental, evolutionary, or spiral acquisition • Employing incremental KC-46, KC- approaches. Y, and KC-Z strategy Section 202: Acquisition Requires DOD to implement recommendations to ensure • Contractor must support design, Strategies to Ensure competition at the MDAP contract and subcontract level. certification, approval and Competition Throughout the Highlights several measures to ensure competition, where installation of future third party Lifecycle of Major Defense cost-effective. contractor modifications at best Acquisition Programs commercially available terms and conditions • Employing incremental KC-46, KC- Y and KC-Z strategy Section 203: Prototyping Requires the acquisition strategy for each MDAP provide • Waiver from competitive prototype Requirements for Major for competitive prototypes before Milestone B approval, was not required for KC-46 Defense Acquisition Programs unless the milestone decision authority (MDA) for that because the program entered the MDAP waives such requirement. Allows the MDA to waive acquisition system directly at MS B the requirement only on the basis that: (1) the cost of with no prior Technology producing competitive prototypes exceeds the expected Development Phase life-cycle benefits of producing the prototypes; or (2) but for such waiver, DOD would be unable to meet critical national security objectives. Title III: Additional Acquisition Provisions Section 302: Earned Value Modifies the 2009 National Defense Authorization Act, • KC-46 has successfully Management Section 887, requires report to Congress on implemented all EVM and implementation of Earned Valued Management (EVM) in Integrated Baseline Review (IBR) DOD. requirements according to statute and regulation Page 31 GAO-12-366 KC-46 Tanker Aircraft Appendix III: DOD and KC-46 Program Office Implementation of Applicable Sections of the 2009 WSARA DOD and KC-46 Program Office WSARA Section Requirement Implementation Section 304: Comptroller Requires reports on growth in operating and support • KC-46 program measuring and General of the United States (O&S) costs and requires review of weaknesses in reporting on O&S costs Reports on Costs and Financial operations affecting the reliability of financial information Information Regarding Major for MDAPs. Defense Acquisition Programs Source: GAO presentation of 2009 Weapon System Acquisition Reform Act (WSARA) legislation and KC-46 Program Office information provided to show compliance with WSARA. Page 32 GAO-12-366 KC-46 Tanker Aircraft Appendix IV: KC-46 Program Compliance Appendix IV: KC-46 Program Compliance with Key Requirements Documents with Key Requirements Documents Requirements Document Specific Requirement Program Compliance Initial Capabilities Document • Description of Concept of • Aerial refueling aircraft will be rapidly deployable, employable, Operations and sustainable throughout global battlespace and environments • Capability Gap • Continued successful accomplishment of the crucial aerial refueling mission is at risk due to increasing demands (already exceeding capability and decreasing availability) as a result of aircraft aging • Operational Environment • Mission requirements dictate aerial refueling aircraft must be Threat capable of operating from worldwide locations day and night, under most operational atmospheric conditions and contain appropriate command, control, communications, and intelligence interfaces and capability for inter-aircraft situational awareness Capability Development • Capability Discussion • Provide worldwide, day/night, adverse weather aerial refueling Document on the same sortie to receiver capable US, allied, and coalition aircraft • Concept of Operations • Aerial refueling is integral to all Air Force core competencies Summary and is used throughout the full spectrum of operations from combat to humanitarian support, including strategic attack, counterair, special operations, counterland, countersea, combat search and rescue, and airlift mission areas • Threat Summary • Tanker aircraft must be able to operate in chemical, biological, and radiological environments as potential adversaries continue to enhance these capabilities System Requirements • Scope • Presents the technical performance required for the Document replacement tanker aircraft • Purpose • Tanker and Boom Aerial Refueling • Computer Resources • FAA Certification and Air Worthiness • Description • Verification Factors/Methods • Testing and Analysis • Inspection Source: GAO presentation of DOD and Air Force information. Page 33 GAO-12-366 KC-46 Tanker Aircraft Appendix V: Comment from the Department Appendix V: Comment from the Department of Defense of Defense Page 34 GAO-12-366 KC-46 Tanker Aircraft Appendix V: Comment from the Department of Defense Page 35 GAO-12-366 KC-46 Tanker Aircraft Appendix V: Comment from the Department of Defense Page 36 GAO-12-366 KC-46 Tanker Aircraft Appendix V: Comment from the Department of Defense Page 37 GAO-12-366 KC-46 Tanker Aircraft Appendix V: Comment from the Department of Defense Page 38 GAO-12-366 KC-46 Tanker Aircraft Appendix VI: GAO Contacts and Appendix VI: GAO Contacts and Acknowledgments Acknowledgments Michael Sullivan (202) 512-4841 or firstname.lastname@example.org GAO Contact In addition to the contact name above, the following staff members made Acknowledgments key contributions to this report: Bruce Fairbairn, Assistant Director; Keith Hudson; John Krump; Mary Jo Lewnard; Don Springman; Roxanna Sun; and Robert Swierczek. (121016) Page 39 GAO-12-366 KC-46 Tanker Aircraft GAO’s Mission The Government Accountability Office, the audit, evaluation, and investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability. The fastest and easiest way to obtain copies of GAO documents at no Obtaining Copies of cost is through GAO’s website (www.gao.gov). Each weekday afternoon, GAO Reports and GAO posts on its website newly released reports, testimony, and correspondence. 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KC-46 Tanker Aircraft: Acquisition Plans Have Good Features but Contain Schedule Risk
Published by the Government Accountability Office on 2012-03-26.
Below is a raw (and likely hideous) rendition of the original report. (PDF)